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Banks (Finance)

Moody's Upgrades Pakistani Banks' Ratings Amid Economic Improvements

Strategic Insights

— 1 min read

Moody's Ratings has upgraded the deposit ratings of five major Pakistani banks, reflecting improvements in the country's external position and operating environment. The upgrades are attributed to the country's enhanced government capacity to support banks, as well as the institutions' resilient financial performance. The move follows Moody's recent upgrade of Pakistan's sovereign issuer and senior unsecured debt ratings to Caa1 from Caa2.

Key Takeaways:

  • Moody's upgraded the local and foreign-currency long-term deposit ratings of five major Pakistani banks: Allied Bank Limited (ABL), Habib Bank Ltd. (HBL), MCB Bank Limited (MCB), National Bank of Pakistan (NBP), and United Bank Ltd. (UBL) to Caa1 from Caa2, with a stable outlook.
  • The upgrades reflect improvements in Pakistan's external position, enhanced government capacity to support banks, and the institutions' resilient financial performance.
  • Banks continue to show resilience, with stable deposit-based funding, high liquidity buffers, and solid earnings capacity.
  • Allied Bank's upgrade was driven by low problem loans (NPLs of 1.6% as of March 2025) and ample liquidity.
  • Habib Bank's stronger profile was supported by solid liquidity buffers, a robust deposit base, and reported NPLs of 5.3% as of March 2025.
  • MCB Bank benefited from strong profitability (return on assets of 1.7% during the first quarter of 2025) and stable deposits and liquidity.
  • National Bank of Pakistan's upgrade took into account its systemic importance and government backing, with 75% ownership through the Pakistan Sovereign Wealth Fund.
  • United Bank Limited maintained a stable deposit base with strong liquidity buffers but has weak capitalisation levels and high sovereign exposure.

Statistics:

  • Pakistan's inflation has dropped sharply from 30.8% in 2023 to 12.6% in 2024.
  • The State Bank of Pakistan cut its policy rate from a peak of 22% in May 2024 to 11% in May 2025.
  • ABL's problem loans stood at 1.6% as of March 2025.
  • HBL's reported NPLs were 5.3% as of March 2025.
  • MCB's return on assets was 1.7% during the first quarter of 2025.
  • NBP's nonperforming loans stood at 14.2% as of March 2025.
  • United Bank Limited's nonperforming loans stood at 14.7% of gross loans in March 2025.

Sources:

  • Moody's Ratings
  • IMF Extended Fund Facility (EFF)
  • State Bank of Pakistan
  • Pakistan Sovereign Wealth Fund
  • Allied Bank Limited (ABL)
  • Habib Bank Ltd. (HBL)
  • MCB Bank Limited (MCB)
  • National Bank of Pakistan (NBP)
  • United Bank Ltd. (UBL)

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